Gold flat ahead of Fed meeting

Gold flat ahead of Fed meeting

Gold staying flat ahead of today’s Fed meeting as investors brace for the Federal Reserve’s interest rate decision.

Almost all investors tracked by the CME FedWatch Tool are betting that the Fed will boost rates by just 25 basis points. This morning, the tool tipped up to show 99.3% of investors anticipating a 25-basis-point hike, with the remaining .7% expecting the Fed to increase rates by 50 basis points. Rates increased by 425 basis points in 2022 taking it to a targeted range between 4.25% and 4.5%, the highest level in 15 years. 

Further support came from this morning’s job numbers. Private company hiring fell far short in January, with payroll processing firm ADP reporting 106,000 new jobs. Economists had been looking for a gain of 190,000. Weather-related issues sent workers to the sidelines.

Investors will also be closely parsing the language of the Fed’s statement and comments from Chairman Jerome Powell after the meeting for indications of the Fed’s future actions, particularly the pace and size of further planned rate increases. Smaller rate hikes are seen as bullish for gold, while smaller ones are bearish. That’s because higher rates diminish gold’s attractiveness as a haven asset.

In addition to the Fed, investors will be looking to the release of the first-of-the-month manufacturing reports from the U.S. and other major economies Wednesday as well as key job reports over the next few days.

Front-month gold futures rose 0.3% Tuesday to settle at $1,945.30 an ounce on Comex, though the April contract slipped 30 cents so far this week. Bullion increased 6.5% in January after gaining 3.8% in December and increasing 7.3% in November. It was the longest consecutive monthly rally since July 2020. The metal fell $2.40 in 2022. The April contract is currently up $3.0 (+0.15%) an ounce to $1948.30 and the DG spot price is $1932.80.

Speculation of a smaller rate hike grew after Friday’s release of the December personal consumption expenditures price index, the Fed’s favorite inflation measure, showed the inflation rate cooled, seen as an indication that the Fed’s previous rate hikes were starting to make an impact. 

The core PCE index, which excludes food and energy costs, rose 4.4% last month from a year earlier, while the overall PCE increased 5% from the year before, data released by the Commerce Department showed. Both were the slowest pace since late 2021.

The Fed raised rates by 50 basis points in December and by 75 basis points each in June, July, September, and November. The European Central Bank and the Bank of England are also scheduled to announce rate decisions Thursday. 

In addition to the central bank decisions, investors will also be closely watching the labor market. Weekly initial jobless claims come out on Thursday and the monthly U.S. jobs report for January from the Labor Department on Friday.

Front-month silver futures increased 0.4% Tuesday to settle at $23.84 an ounce on Comex, and the March contract rallied 0.9% in the first two days of the week. Silver fell 0.9% in January after rising 10% in December and increasing 14% in November. It advanced 3% in 2022. The March contract is currently down $0.111 (-0.47%) an ounce to $23.725 and the DG spot price is $23.70.

Spot palladium rose 0.8% Tuesday to $1,671.00 an ounce and is up 2.6% this week. Palladium dropped 7.5% in January after tumbling 4% in December. It lost 5.7% in 2022. Currently, the DG spot price is up $40.70 an ounce to $1719.00.

Spot platinum advanced 0.5% Tuesday to $1,024.30 an ounce and gained 0.7% this week. Platinum retreated 4.3% in January after increasing 3.4% last month and rising 11% in November. It surged 10% in 2022. The DG spot price is currently down $4.60 an ounce to $1018.20.

Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or a recommendation regarding any particular security, commodity, or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities, or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand, and accept this disclaimer.